Safety-Kleen faces pros, cons in going public

If all goes according to plan, at some unspecified point in the future, Safety-Kleen Inc. will go public.

The deal is the ninth largest IPO in the U.S. pipeline, according to a spokeswoman in the New York office of Dealogic, an investment data concern. But is it a good thing for the Plano-based company?

Naturally, it’s hard to say whether Safety-Kleen will prosper if and when its stock goes live on the New York Stock Exchange under the ticker symbol “SK,” as it announced it intended to do earlier this week.

The company, which supplies used-oil recycling and industrial cleaning services, plans to go public in conjunction with the sale of up to $400 million of stock by a group of institutional shareholders, including Dallas-based Highland Capital Management, JPMorgan Chase and Contrarian Capital Management.

Safety-Kleen will get no proceeds of its investors’ sales, Securities and Exchange Commission filings say.

To be sure, being public has its benefits. The primary one: A public company’s stock can be valuable in doing mergers and acquisitions. Not surprisingly, a well-performing stock is a valuable tool in getting M&A deals done, and in elbowing out rivals who might be interested in the same business that’s in a company’s rifle sites.

“It’s to give currency from which to do transactions,” said Lyndon James, partner and co-founder at BlackBriar Advisors, a Dallas firm that helps improve companies’ finances and operations. But then there are the pitfalls of life as a public company. Which, experts say, are many.

“Unless you’re actively looking to raise money and have reason to be public, I see very little value” in it, said Bob Schleizer, managing partner and co-founder of BlackBriar. Schleizer and other experts point to various woes that afflict public CEOs. Among them:

Additional costs for reporting financials and complying with securities laws and regulations. Safety-Kleen, for instance, expects to spend an additional $1 million to $3 million annually on various compliance and reporting responsibilities, and may need to hire additional accounting, financial and compliance staffers with the right public-company experience, SEC filings say. A company spokesman declined to comment for this story.

The fame game. A public company CEO spends 20 percent to 30 percent of his or her time dealing with investor-relations issues, Wall Street and other outside parties, estimates Devesh Sharma, a Dallas-based partner at Newport Board Group, an advisory firm run by a group of former corporate CEOs.

The quarterly reporting grind. “Getting geared up for quarterly public reporting is a massive process,” Schleizer said. It places a burden on a company’s financial staff, and financial statements must be scrutinized by lawyers before the documents are released to the public, Schleizer said. “It’s both burdensome and expensive.”

Myopic focus on quarterly results. Wall Street tends to think in 13-week blocks, and that can force public CEOs to manage the business for quarterly earnings rather than what is in the best long-term interest of the business, experts say.

After filing the IPO documentation with the SEC, Safety-Kleen, like any company in that position, will go on a roadshow to talk to large investors, according to Sharma. That roadshow likely won’t take as long as it does for some businesses, since Safety-Kleen is more of a known quantity to the investment community, he said. Then there will be a quiet period and a launch of the stock on the public markets.

How long all of this will take is uncertain and will depend largely on Safety-Kleen’s advisers in the IPO process, Sharma said.